Brought to you by Advance Gold (AAX.V)
I have gold on my mind a lot lately, as you can probably see in the increased reporting of late. I’m also very bullish on silver, and other metals, but, at this point, I’m primarily focused on gold and silver.
What happens with the US dollar (USD) has an impact on the price of gold, silver, as well as other commodities, the most watched price is how they are doing in the USD. I would like to gladly point out, that not only is gold at near record prices in several currencies. Recently, we have even seen gold and USD up on the same days. Say it’s so Joe, it is so Joe.
One of the reasons I’m writing a lot more is because I can tell by how many readers are reading the reports and watching the video shows, my email and phone more active as well. The winds are changing, that gail force wind that has been in our face for too long has shifted, the golden winds are changing course.
This report, I have no new picks. Next I’m going to add a little section for commentary on gold, silver and the USD. It is a revival from the old format I started with in my email newsletter days.
Gold is Good
Lately I have been writing a lot about the fundamentals of supply and demand for gold.
Which is considered fundamental analysis. But, I have always considered myself a hybrid analyst. I look at the fundamentals to understand the big moves, and the charts, for technical analysis to understand shorter term timing better.
Check out recent articles on the website for the fundamental look. In this report, I want to show a few charts that I think are very bullish and pointing us to much higher gold prices.
I get the charts for free from Finviz, they provide a lot of great info. Check them out at https://finviz.com/.
This first chart is a daily chart, which gives us a nice snapshot of the past year. I’ve drawn a cup below the trend. Sorry for my poor drawing skills, I have enough trouble with a pen and paper, let alone with a mouse and virtual pen.
But, I think you get the point and can clearly see the left side of the cup from around April, 2018, until August, then it went sideways for a bit, creating the bottom. Then, since around the middle of November, we are seeing the very bullish right side of the cup.
During the month of January, we also had another extremely bullish technical breakthrough, when gold went through a Golden Cross. With the 50-day moving average breaking through the 200-day.
The right side of the cup, and the Golden Cross are very bullish trends, they aren’t always right, but, when they are, gold has a lot of legs to the upside.
The next chart is a weekly chart, that give us a good snapshot of the past three years. I highlighted two cup formations, the one on the right is the current cup we are going through.
The one in the middle of the chart is from another recent cup formation in late 2015. It is more steep on the left and the right of it. I would point out that after it formed the left and right side by January, 2016, it then had a breakout for around the following six months that took it much higher.
The trends in the USD, suggests that we are heading for another solid period for gold. I think we will finish the right side of the current cup, at around $1350, then it will bust through that level and we should have a serious breakout through a long term resistance point you will see clearly in the third and final chart on gold.
This final chart for gold is the monthly chart, that takes us way back to the 1990s. I’m going to age myself a little, I came into the mining business as a consultant way on the left side of the chart. There are two basing formations, and a multiple year bull run that topped in 2011. The sideways basing on the right is our current multiple year base that started in 2013. In that basing action, if you drew all of the tops are at around $1350.
Now the base on the left was many years, but it had a more narrow top and bottom line. It was a very challenging period in the industry, until the golden sun started to shine again in 2001. That was the start of the charge when gold started on a tremendous decade long bull market.
Some final points on gold. Whether I look at long to short term trends, it is coming up bullish. But, I’m glad to finish on the final chart, because it is the one I think most accurately indicates where gold is going.
In the final gold chart, I will point back to the two basing periods on either sides of the big bull run. There is a common denominator between these two periods beyond they show sideways action.
If you look at either period, the valuations of gold stocks, from the majors to the developers and explorers were very cheap. Back in the late 1990s, valuations compared to realistically what they had in the ground was extremely poor. Funding opportunities became harder to obtain for exploration. This song sounds familiar.
As they say, past can be prologue. Well fast forward to the right side of the big bull run, and guess where we are with valuations? If you guessed right back to pre bull market valuations, you my friend would have hit the nail on the head.
Fortunes were made, getting in early on quality projects at reasonable valuations, then let them deliver with the truth machine. For those that bought quality and made good moves during the decade long gold bull market, they were handsomely rewarded.
Where gold goes, so goes silver. I’m bullish on silver because I see very similar long term supply and demand fundamentals. But, when I buy metals, I do it by trying to buy ounces in the ground.
Which means that I need to find good silver stocks, from exploration to producer status. There just aren’t very many of them. If you are lucky enough to get into a silver stock that you enter close to the ground floor. The ride up can be exciting. Because they are few and far between, the valuations tend to be at very nice premiums.
Alright, there is one chart I wanted to show you for silver. This is the monthly silver chart, if you noticed the basing and bull move like in the monthly gold chart above, you get a golden star.
There are a few indicators that stand out in the long term silver chart. One is the long basing on gold and silver, on either side of the 2001-2011 gold bull run. Another is that silver took longer to join the gold bull. For gold it started in 2001, for silver, it wasn’t for a couple years later.
Finally, if you look at the parabolic move on silver just before the peak. When silver goes parabolic, you may want to take some silver and gold coins off the table.
US Dollar; a.k.a. USD, a.k.a $, a.k.a. King Dollar
This is the arch nemesis of the quoted price of gold and other commodities, the one everybody watches. It is the gorilla in the room. When USD is going up, commodities are under pressure, but, when USD is down, it means the wind is at gold’s back, smooth sailing ahead.
Lately, not only is gold at near record highs in many currencies worldwide. In Canadian dollars, Australian dollars and other currencies, gold is paying off nicely. Even in USD terms lately, on some days, USD and gold are up.
Central bankers are seeming to look to gold as a nice alternative to owning richly valued USD. Who would have thought to use gold to have some hard assets backing your currency...
Interest rates and debt, have a big influence on what happens with interest rate policy out of the Federal Reserve. Where interest rates go, so goes the dollar and it looks like it could be on thinner ice.
National debt is over $22 trillion, which is larger than the size of the entire economy.
That is a lot of debt and “Tariff Man” Trump in the White House spending, without cutting big expenditures makes the ice even thinner.
It is playing with fire now for the Fed to raise rates, they would probably like to be able to raise more. It would give them a little more room with rates in case of an economic slowdown. The new normal is likely going to be a Fed rate around 2.5%.
The Trump administration has opened up the debt balloon, with tax cuts for the rich, very little to those further down the food chain, and kept spending at high levels. This is basic math, you bring in less, that advantages the elite not the regular folks, while continuing to spend, you have to run up debt.
The Fed is not very well prepared to do anything if there is a slowdown, one has to remember, this expansion is long in the tooth, well beyonds its best by date. A strong argument can be made that not only is the Fed done raising, it looks like the next big move will be to lower.
Trump likes being “Tariff Man”, having trade wars with China, while he spends and runs up debt. Somebody has to be the adult in the room. Trump math is a little shady, but, the Fed can see the reality.
They are done raising rates, USD is headed for rough waters, gold will benefit, as will silver, copper, other crucial metals, and battery metals. We are likely on the verge of a big breakout for gold in USD.
The magic number I’m looking at is $1350 for gold. I see some weakness in USD that will help. After that we have some smooth sailing for gold.
Golden Stocks On The Radar
I currently have a strong group of picks, with a few of them bubbling up to the top of my radar screen. And they seem to stay up at the top, it is no wonder, they all have found bonanza grade gold, and recently reported big grades, they also have reasonable valuations, and their discoveries are wide open.
Amex Exploration - Great Bear Resources - Walker River Resources
All three are in great mining jurisdictions, Amex (AMX.V) is in Quebec, Great Bear (GBR.V) is in Red Lake, Ontario, and Walker River (WRR.V) is in Nevada. I like all three of these jurisdictions because when you have success making a discovery, the market pays a premium for the projects in these jurisdictions.
They have all hit bonanza grade gold with their drilling. The highest out of these three, would be Great Bear that recently hit 1600 g/t gold over 0.70 of a metre.
Amex is nothing to sneeze at, they have a high-grade zone that has hit bonanza grades, in a narrow steeply dipping zone, with 5 holes, covering over a couple hundred metres from top to bottom. They have also stepped out 25 metres, and hit visible gold. That hole is pending, I’ll be eager to see if they keep hitting the bonanza grades in the step out.
Walker River, has hit bonanza grades over multiple metre intersections. They have a very large alteration zone beside a key fault, that gives them plenty of room to be looking for several millions of ounces.
Part of the reason they have also been coming up a lot lately is they have all hit very sweet grades of gold. But, folks want to know which one is better and because I cover all three in the reports, they ask me.
To make that comparison, I start with the potential. They have all delivered with the truth machine. They are all wide open so they all have the potential to be sitting on large gold systems.
Next I need to look at the valuations. In the case of Great Bear, they have around 50 million shares fully diluted. Between a couple big individual shareholders and the board, they are close to 25-30% of the stock. So it is tightly held and they are just shy of a $200 million CAD valuation.
Amex Gold has 56 million shares fully diluted, I checked the website and their corporate presentation, and I couldn’t find any info on the insider ownership. My guess is they don’t have a big percentage of insider ownership. I would guess the stock is not concentrated in as tight of hands as GBR. Amex closed on Friday, at just shy of a dollar, so, they have around a $50 million CAD valuation.
Walker River Resources, has 145 million shares, of that 33 million are warrants that are in the money and would bring in a few million bucks. Around ⅓ of them expire in April, and there is a pretty good chance that is where they will get funding for further drilling. Based on the Friday close, they have around a $20 million valuation.
On the stock tightness scale, Walker River is the loosest, followed by Amex and easily the tightest is Great Bear. Simple numbers say the tightest has the highest valuation.
I would argue they are a fair bit ahead in drilling, and concerning the respective teams understanding of their projects. Great Bear is in elephant country for big gold deposits of high-grade and high margins to mine there. It has all the infrastructure with Great Bear’s claims right beside the main road going into Red Lake.
Recently, Great Bear did a webinar that you can find on their website. In it, their top guy on exploration, Bob Singh, did a 3D model of the project. It is very impressive. Even a non-geo type can clearly see what they have hit, the structural story of where they have hit, plus, how big it could be. They have a lot of strike extension to test, they also have the depth potential as well.
In Red Lake, deeper is good, it is deep in the gold systems, 1000 metres deep and more, where the highest-grades are found and mined. I think they have the strongest project, and all things considered, they deserve their valuation. I would also argue it represents the potential of the project. They very well could be sitting on a future Red Lake, high margin, high-grade gold mine.
With Amex, they are hitting bonanza grades, but, the high-grade zone is also narrow. This is common, not something to frighten one off, but, for sure be aware of. I’m very encouraged with the grades top to bottom in the high-grade zone and the step out with visible gold.
Great Bear and Amex have the high-grades in common, and the narrow zones. The big question is would I buy 5 Amex at its valuation to 1 Great Bear at its valuation? This isn’t even close, Great Bear for sure, it is in Red Lake, they can drill all year, are funded to be drilling all year. I also think they have a really big system.
Considering Great Bear is leading the potential to valuation horse race. It gets a little more interesting when it comes to the battle between Great Bear and Walker River.
With these two, Walker River has 1/10 the valuation of Great Bear. This horse race is getting more interesting at 10 Walker Rivers to 1 Great Bear.
I have to admit, it isn’t just the odds that seem to be leaning toward Walker River. I can feel the Great Bear shareholders are about to get their hair up.
Although Great Bear has fantastic grades, Walker River has bonanza grades over thicker intersections. When it comes to the grades coming from any of these three, I don’t think you can do the straight number comparison. They have all proven they have bonanza grade gold mineralization.
There is more data out for Walker River and Great Bear. I think they could both be sitting on big gold systems. At the valuation, I have to go with Walker River being a better horse to wager on in the potential to valuation three horse race.
Now I have to do the disclosure, I only own one of the three. If you guessed Walker River, you just got your second gold star. I am a biased shareholder of only Walker River.
I also have to give myself some wiggle room, these are exploration plays. Looking for high-grade gold mines. Those aren’t easy to find. Everything could change in the next round of drill holes.
That will be the closing note, on it, I will add that even though I may be biased, it doesn’t mean I’m wrong.
Oh yeah, one more thing, all of them are awaiting drill results. You better stay tuned.
I just did a little insight into how I value things. Ultimately, all I really care about with each individual company is do they make sense on their own merits. The balance point is based on weighing the potential to the valuation.
Last weekend, I did updates on the rest of the companies covered in the reports. Nothing has really changed with them since. I would encourage you to check out that report for my current outlook on the various picks, it’s on the website.
Stay tuned, there is serious action ahead for gold, silver and the stocks focused on these metals heading to go into overdrive. I plan to lead the pack in reporting on the sector, and in quality of picks.
Don’t forget to visit the website, share the reports, join the email list if you aren’t already. Encourage others that are interested in the markets and stocks I follow to join as well.
All the best,
Allan Barry Laboucan
Allan Barry Reports
Advance Gold (AAX.V)
P.S. my reports are for information purposes only, before making any investment decisions it is important to do your homework and speak with your financial advisers.